-LRB- CNN -RRB- -- The growth of e-commerce in China has outpaced that of western countries during the past five years . This is largely due to the rapid growth of Internet users , improved online payments , increasing coverage and improving services .

Such a trend will continue in the next five years with sales volume predicted to remain at 27 % cost of goods sold . Among all the e-commerce business models , business-to-consumer e-commerce is outgrowing others due to its credibility , scale , and services variety and scope .

By 2017 , business-to-consumer e-commerce in China is predicted to double its share and reach 46 % of the total online sale , according to the China Internet Network Information Center . Yihaodian 's fast growth illustrates this trend .

In the five years since its launch in July 2008 , Yihaodian has increased its selection from 3,000 stock-keeping units to over 2 million , fulfillment centers from one in Shanghai to 17 in seven cities , revenue from 4 million yuan to over 6 billion yuan , and employees from 40 people to over 9,000 .

Yihaodian , which started as an online supermarket by offering mostly fast-moving consumer products , now boasts categories ranging from consumer electronics , apparel , books to mom and baby products .

China , in its current state , lends itself perfectly to e-commerce . The rising incomes of its massive population pave the foundation for a growing user base and this population 's density and residential infrastructure allow for efficient logistics . And that 's only the beginning .

China 's Internet user penetration is barely 43 % compared to the United States , which is near 80 % , and its online shopping penetration is less than 40 % of its Internet user base , about half of the U.S. . If these statistics reach the U.S. levels , e-commerce in China will triple its scale .

1 . Characteristics of Chinese e-commerce

China 's e-commerce industry has many unique characteristics , some a result of its nascent state and some a result of China 's intrinsic cultural behaviors . Yihaodian exemplifies several of these characteristics .

Cash on delivery -LRB- COD -RRB- is still a popular means of payment due to lack of trust in both online payment systems and the e-commerce providers themselves .

However , when people start to gain trust through trial purchases , they shift towards online payment . When we launched Yihaodian in 2008 , we had more than 70 % of orders paying COD , but now it is less than 20 % .

Last mile delivery is mostly done on mopeds and motorcycles due to dense city traffic and the high cost of delivery by trucks . The logistics industry is very fragmented in China , with the likes of UPS and Fedex in China still unable to provide nationwide coverage and quality service .

Many large e-commerce companies have chosen to build their own last mile delivery capabilities to ensure a better customer experience and to facilitate faster growth . In 2011 , Yihaodian started our own last mile delivery alongside 30 third party logistics partnerships , allowing us to cover the entire nation . Such a decision was based on the fact that more than 60 % of our customers ' complaints were centered around delivery services .

Very soon , our own last mile delivery services started to bear fruit with a significantly improved customer experience and a 10 % improvement in our CSAT -LRB- customer satisfaction -RRB- score .

As our order density increases over time , our delivery cost also declines . In 2012 , we launched the Service by Yihaodian -LRB- SBY -RRB- model to provide our merchants with logistics , marketing , platform , and data services . Through SBY , our last mile delivery fleet not only serves our own customers , but also merchants who sell through their own website or through other marketplace platforms . This has further helped us reduce our last mile delivery costs .

Chinese shoppers ' behavior is quite different from western countries . For example , online shoppers in the U.S. are used to opening one window at a time and flipping back and forth via navigation buttons , but Chinese online shoppers prefer that each click opens a new window allowing them to navigate a site by jumping between several windows .

The user interface of e-commerce websites in the U.S. are usually very simple and clean with plenty of images , but Chinese shoppers favor crowded websites with information and links all packed into one page providing the impression of a high-energy shopping atmosphere . Yihaodian 's first homepage was simple and clean mimicking that of such model websites in the western countries , but after receiving our users ' feedback , we quickly made changes .

In general , Chinese consumers are very price sensitive and right now , Chinese e-commerce is primarily a promotion driven business . Shoppers do not yet value the concept of `` time is money . '' Whereas , in the western countries , shoppers are willing to pay considerable fees for expedited delivery , this behavior in China is rare .

2 . Challenges faced by multi-national companies

Not many successes for multi-national Internet companies -LRB- not only e-commerce companies -RRB- can be found in China . Failed or struggling examples include eBay , Google , Yahoo and Groupon .

Reasons include : a -RRB- Insufficient understanding of Chinese consumers ' shopping behavior , simply copying global business models to fit China 's market ; b -RRB- Management is not localized , not adapting for local competition ; c -RRB- Higher operational cost than local companies due to compliance and operational overhead ; d -RRB- Improper organizational structure , resulting in low decision efficiency . E-commerce is a fiercely competitive field , needing much faster and dynamic decisions and local management teams need to be more empowered to respond to the dynamics of the local market .

Yihaodian received an investment by Walmart in 2011 , establishing our strategic partnership . We share resources in sourcing , logistics , e-commerce technology , and private label products . This partnership has helped Yihaodian to provide Chinese consumers with more choices , better service and even better prices . It is more beneficial for multi-national companies and brands to conduct e-commerce in China through strategic partnerships or through an e-commerce solution provider to ensure a higher success rate .

3 . Trends in e-commerce in China

China 's e-commerce industry is experiencing a transition from online shopping as more of a niche market towards online shopping becoming a lifestyle . It is evolving from tasting new , special , and hard-to-find products to buying daily consumption needs such as food , drinks , toothpastes and shampoos .

Mobile commerce is growing at an even faster rate . Consumers using mobile apps exhibit different buying behavior from those using personal computers . For example , Yihaodian 's traffic on personal computers and on mobile apps peak at different hours of the day and different days of the week .

Our mobile traffic peaks in the evenings and weekends while personal computer traffic peaks in the early afternoons and during weekdays . Orders on apps are usually smaller , but with a higher frequency and people using both devices are more loyal and sticky .

E-commerce in China is also rapidly penetrating third and fourth tier cities , predominantly due to growing Internet penetration , a local shortage of shopping malls and supermarkets , and an overall lack of available products .

Social commerce is also starting to blossom in China . People trust their friends , opinion leaders and fellow consumers . The advancement of Weibo and social networking sites has accelerated this . Yihaodian started social commerce five years ago by embedding our website into a well-know social networking site Tianya . Yihaodian 's official Sina Weibo site has attracted over 2 million fans and some of this site 's marketing events have resulted in over one million message forwards .

There is also a trend of integration in the Internet world in China . In the past , we have independent portals : search sites , navigation sites , game sites , social networks , and e-commerce , but many are being integrated to provide customers with one-stop service .

On November 11 , 2012 , China 's e-commerce industry single handedly created a nationwide promotions holiday which we referred to as `` Single 's Day . '' Online sales reached 30 % of total national retail , a number that will no doubt become the norm in the near future .

We are fortunate to witness this change and proud to be a part of making this happen .

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By 2017 , business-to-consumer e-commerce in China is predicted to double its share

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Yihaodian , an online grocery business , has boomed since 2008 launch

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Facets of Chinese e-commerce differs from U.S. websites , writes Yu Gang